McCarthy & Stone confirms forecast gaffe

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The Independent Online

McCarthy & Stone, the retirement homes builder that recently rejected a bid from its chairman and co-founder, was yesterday forced to confirm a profit forecast made mistakenly by its chief executive last month.

The Takeover Panel demanded the company substantiate statements made by Keith Lovelock that were reported in the media on 24 June. These indicated the company would outperform market expectations at the time.

This was construed by the Takeover Panel as a profit forecast, and the board of McCarthy yesterday had to publicly confirm that business was doing better than expected. Profits for the year ending in August are on course to exceed the £98.5m that analysts had pencilled in. Its profits leapt 80 per cent in the first six months of its financial year and its average house price has risen 19 per cent to £127,700.

The company's auditor, Ernst & Young, was also required to publicly stand behind the company's assumptions used for the profit forecast, as was UBS Warburg, McCarthy's adviser.

"We have discussed the forecast, together with the bases and assumptions upon which it has been made, with the company's auditors. We consider the forecast has been made with due care and consideration by the company," a statement from UBS to the Takeover Panel said yesterday.

McCarthy is still subject to the Takeover Panel rules, despite rejecting an offer from John McCarthy, its founder and chairman, last month. Mr Lovelock said at the time that the offer put forward by Mr McCarthy, who owns 13 per cent of the company, 'did not reflect the right value of the company'. Analysts expect the board of McCarthy to be holding out for an offer upwards of £600m. Shares in the group yesterday closed at 506.5p, giving it a market capitalisation of £527m.

Mr McCarthy was yesterday still on the board as non-executive chairman, although his position has been put under review by the rest of the independent directors. Both sides were yesterday remaining tight-lipped on whether negotiations with Mr McCarthy had been rekindled.

PricewaterhouseCoopers, advisers to John McCarthy, refused to comment on his intentions. The future of the company remains up for grabs. A number of rival homebuilders have ruled themselves out from being interested in the company, but it is thought likely that McCarthy would be an attractive bolt-on acquisition for many firms.

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